Medicaid and the Housing and Asset Decisions of the Elderly: Evidence from Estate Recovery Programs

by Nadia Greenhalgh-Stanley, Kent State University

An important trend in the United States has been the increased dependence on Medicaid to provide long-term care services to millions of elderly annually. In this project, I attempt to circumvent the difficulties that have plagued previous studies on the impact of Medicaid on elderly housing and wealth decisions by using recent state-by-calendar-year level variation in the Medicaid treatment of owner-occupied housing assets from the adoption of Medicaid estate recovery programs. Prior to estate recovery programs, the house, which represents the most important non-pension asset to the elderly, was exempt from determining Medicaid eligibility and served as both a source of residence and a store of wealth. Adoption of estate recovery programs changed the owner-occupied housing safety net by making the house eligible for recovery by the government. Panel data on the AHEAD cohort are used to investigate the impact of state adoption of estate recovery on housing decisions and wealth holdings among the elderly. In addition, for the first time, the exit data of the HRS are exploited to provide new and useful information describing Medicaid’s impact on end-of-life behavior.

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